Kisan credit cards to double up as debit cards

NEW DELHI: The nearly 10 crore farmers who hold kisan credit cards (KCC) will soon be able to use their card as a deposit account and a debit card.

This will help the government scale up its financial inclusion plan quickly without relying on bank accounts alone.

KCC, which has been instrumental in faster delivery of credit to farmers, is like an overdraft account with a bank that has to be operated through a cheque book or withdrawal slip. The card is used only to store the details of the account.

"We are working on revamping the current concept of KCC. It is aimed at providing more financial freedom to farmers who can use this at various point of sales," said a finance ministry official, requesting anonymity.

The revamped card will have features of both credit card and deposit account.

"This would reduce the need for multiple accounts in the bank," said the official.

Banks will give interest credit to farmers with credit balances in KCCs to encourage them to remit farm sale proceeds into their KCC account.

"Today, farmers avail the full credit amount in one go and end up paying higher interest amount. If it becomes a debit card, they will use it as and when required and pay substantially lower interest burden," said UC Sarangi, former chairman of Nabard, or the National Bank for Agricultural and Rural Development.

The kisan credit card scheme, which is administered by Nabard, was introduced in August 1998. By the end of September 2011, 5.12 lakh crore had been lent through KCCs.

A task force set up under Nabard had in June 2010 suggested that the KCC should be technology-enabled, and the credit limit be fixed for five year based on the banker's assessment of total credit needs of the farmer for a full year. Currently, credit limit for three year is fixed on the basis of cost of the assets proposed to be acquired by the farmer and his repayment capacity. Within this limit, banks carve out sub limits to cover short term, medium term and consumption needs.